View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by The University of Akron The University of Akron IdeaExchange@UAkron Akron Law Review Akron Law Journals June 2015 Second Level Agreements Yafit Lev-Aretz Please take a moment to share how this work helps you through this survey. Your feedback will be important as we plan further development of our repository. Follow this and additional works at: http://ideaexchange.uakron.edu/akronlawreview Part of the Intellectual Property Law Commons Recommended Citation Lev-Aretz, Yafit (2012) S" econd Level Agreements," Akron Law Review: Vol. 45 : Iss. 1 , Article 3. Available at: http://ideaexchange.uakron.edu/akronlawreview/vol45/iss1/3 This Article is brought to you for free and open access by Akron Law Journals at IdeaExchange@UAkron, the institutional repository of The nivU ersity of Akron in Akron, Ohio, USA. It has been accepted for inclusion in Akron Law Review by an authorized administrator of IdeaExchange@UAkron. For more information, please contact [email protected], [email protected]. Lev-Aretz: Second Level Agreements 8- LEVARETZ MACRO FINAL.DOCM 2/24/2012 9:30 AM SECOND LEVEL AGREEMENTS Yafit Lev-Aretz* I. Introduction ...................................................................... 137 II. The Web 2.0 Era and the Inception of UGC .................... 141 III. Applying Copyright Law to User-Generated Content ...... 144 A. Secondary Liability .................................................... 144 B. The DMCA Safe Harbors and the Liability of OSPs. 146 IV. Tolerated Use .................................................................... 149 V. Second Level Agreements ................................................ 152 A. Definition and Background ........................................ 152 B. YouTube’s Content Partnerships as a Case Study ..... 155 C. The Sphere of Second Level Agreements .................. 161 D. Second Level Agreements—Virtues and Vices ......... 166 VI. Legal and Practical Implications, Normative Assessment, and Careful Prediction ................................. 179 A. Legal and Practical Implications................................ 179 B. Normative Assessment .............................................. 183 C. The Future of Second Level Agreements .................. 186 VII. Conclusion ........................................................................ 198 I. INTRODUCTION Jill Peterson and Kevin Heinz got married in a Minnesota church and made a video of the wedding party dancing down the aisle to “Forever” by Chris Brown.1 A video of this very entertaining march * S.J.D. Candidate, University of Pennsylvania Law School. I am grateful to Prof. Gideon Parchomovsky for invaluable contributions and encouragement. I further thank Prof. Tim Wu and Prof. Kenneth Crews, Prof. Edward Lee, Dr. Shmuel Becher, and the participants of the SJDs workshop at the University of Pennsylvania Law School for insightful comments and suggestions. Special thanks are also due to Ohad Lev-Aretz, Erez Aloni, Maayan Filmar, Luke Aneka and Nizan Geslevich-Pakin for their useful remarks. I would also like to thank the ISEF Foundation for their generosity and support, which made this project possible. The opinions addressed in this Article are solely those of the author. 1. JK Wedding Entrance Dance, WIKIPEDIA, http://en.wikipedia.org/wiki/JK_Wedding_Entrance_Dance (last visited Nov. 18, 2011). 137 Published by IdeaExchange@UAkron, 2012 1 Akron Law Review, Vol. 45 [2012], Iss. 1, Art. 3 8- LEVARETZ MACRO FINAL.DOCM 2/24/2012 9:30 AM 138 AKRON LAW REVIEW [45:137 was uploaded to YouTube as the “JK Wedding Entrance Dance.”2 Assuming that neither the happy couple nor their friends obtained a copyright license to use Brown’s song, it is somewhat befuddling that it has been over eighteen months, in which more than 61 million users have viewed this video, yet it has not been removed from YouTube. It is even more puzzling given the fact that this video is one of myriad examples of unauthorized uses of copyrighted content on user-generated content platforms. The emergence of the Web 2.0 phenomenon has challenged existing copyright practice by offering users an opportunity to engage in activities previously reserved for professionals only and to distribute content to an inconceivable amount of people through User-Generated Content (“UGC”) platforms.3 While users have utilized this advancement to share many original works, UGC platforms are saturated with infringing content, either in the form of derivative works or as pure reproductions of copyrighted works.4 Nonetheless, and although platforms and end-users are exposed to copyright infringement suits, UGC platforms are remarkably prosperous in cyberspace. Two developments in copyright practice, which have materialized as a response to the challenges posed by the Web 2.0 era, have allowed the outstanding success of UGC platforms. The first development, which has been already recognized in legal commentary, is tolerated use. Tolerated use occurs when a copyright owner knows about infringing activity but does not act to halt it or seek to be compensated for it.5 This Article claims that although tolerated use is fairly widespread in the UGC context,6 it cannot, by itself, explain the undisturbed presence of countless copyrighted works posted by users. The second advancement, 2. JK Wedding Entrance Dance, YOUTUBE, http://www.youtube.com/watch?v=4- 94JhLEiN0 (last visited Nov. 18, 2011). 3. The term Web 2.0 refers to collaborative, user-generated content space, which uses the Internet as a software platform. See Tim O’Reilly, What is Web 2.0, Design Patterns and Business Models for the Next Generation of Software, O’REILLY (Sept. 30, 2005), http://oreilly.com/web2/archive/what-is-web-20.html. UGC is often defined as content uploaded and sometimes created by Internet users, rather than produced by the website itself. For a comprehensive definition, see Steven Hetcher, User-Generated Content and the Future of Copyright: Part one—Investiture of Ownership, 10 VAND. J. ENT. & TECH. L. 863, 870 (2008). 4. Daniel Gervais, The Tangled Web of UGC: Making Copyright Sense of User-Generated Content, 11 VAND. J. ENT. & TECH. L. 841, 846-60 (2009). 5. Prof. Tim Wu, coined the term “tolerated use.” Tim Wu, Tolerated Use, 31 COLUM. J.L. & ARTS 617, 619 (2008) [hereinafter Wu, Tolerated Use]. 6. Id. See also Edward Lee, Warming Up to User-Generated Content, 2008 U. ILL. L. REV. 1459, 1506 (2008) (arguing that informal copyright practices serve as significant gap-fillers in copyright law and referring to a range of reasons that have allowed UGC to thrive, including outright ratification of mass user practices). http://ideaexchange.uakron.edu/akronlawreview/vol45/iss1/3 2 Lev-Aretz: Second Level Agreements 8- LEVARETZ MACRO FINAL.DOCM 2/24/2012 9:30 AM 2012] SECOND LEVEL AGREEMENTS 139 which I term “Second Level Agreements,” has yet to be analyzed in depth by legal commentary, although it holds the key to the resolution of the said puzzle. Second Level Agreements are preemptive licenses granted by copyright owners to platforms operators, with the purpose of ratifying the mass usage of copyrighted content by their users. Under such arrangements, copyright owners authorize the employment of particular works by platforms’ users in return for royalties, company stakes, or a share of advertising revenues. Many UGC networks, such as YouTube, Myspace, and Yahoo, have chosen this course to shelter themselves from secondary liability claims. The first Second Level Agreement was concluded in 2006, when YouTube announced a video distribution and revenue partnership with Warner Music Group.7 According to YouTube’s press release, under the “first-of-its-kind arrangement, YouTube users will be able to incorporate music from WMG’s recorded music catalog into the videos they create and upload onto YouTube.”8 While licenses for the purpose of pure reproduction are common in copyright practice,9 these agreements mark the first time in copyright history that a user creates a derivative work pursuant to a license that was not granted directly to her. Because the agreements are negotiated and concluded between copyright holders and UGC platforms’ owners, users end up employing copyrighted works under the terms of a license they were neither a part of designing, nor were fully aware of its details. Users can gather information as to the terms of these agreements only from the few press releases and the media. Moreover, users are legally bound only by the platforms’ terms of service, which do not reflect the existence of Second Level Agreements.10 Therefore, while in practice Second Level Agreements allow copyrighted materials posted by users on UGC platforms to remain online, the agreements should have no legal impact on the users’ legal status. This Article analyzes in-depth a significant practice that has not been recognized in legal scholarship. Their unique structure and the way in which Second Level Agreements have developed within the relatively 7. Press Release, Warner Music Inc., Warner Music Group, Warner Music Group and YouTube Announce Landmark Video Distribution and Revenue Partnership (Sept. 18, 2006), http://investors.wmg.com/phoenix.zhtml?c=182480&p=irol-newsArticle&ID=906153. 8. Id. 9. For example, when a user purchases a track on iTunes, she is allowed to export, burn (if applicable), or copy (if applicable) the sound recording solely for personal, noncommercial use. See iTunes Store Terms of Service, Section